Posted on July 4th, 2023

Tax debt can be a heavy burden, but there are options available to help individuals and businesses in resolving their tax liabilities. One such option is an Offer in Compromise (OIC). In this blog post, we will delve into the details of an OIC, how it works, and how it can potentially help you settle your tax debt for less. If you find yourself struggling with tax debt, keep reading to gain a better understanding of this powerful tool.

What is an Offer in Compromise?

An Offer in Compromise is a program offered by the Internal Revenue Service (IRS) that allows taxpayers to settle their tax debt for less than the full amount owed. It is designed to provide taxpayers with a fresh start and relieve them from overwhelming tax liabilities. However, it's important to note that not everyone qualifies for an OIC, and the application process can be complex. Seeking professional guidance from a tax advisory service is highly recommended to navigate through the requirements and increase the chances of a successful OIC submission.

How Does an Offer in Compromise Work?

When you submit an Offer in Compromise, you are essentially proposing an agreement to the IRS to settle your tax debt for a reduced amount. The IRS carefully evaluates your financial situation, including your income, expenses, assets, and overall ability to pay. They assess whether accepting your offer would be more beneficial for them compared to continued collection efforts.

To determine the offer amount, the IRS follows a specific formula that takes into account your ability to pay and the value of your assets. The formula considers your future income potential, allowable expenses, and the equity in your assets. It's crucial to accurately calculate these figures and present them in a manner that maximizes your chances of acceptance. Working with tax professionals experienced in Offer in Compromise cases can greatly assist in this process.

Benefits of an Offer in Compromise

Reduced Tax Debt: An OIC can potentially result in significant savings by settling your tax debt for less than what you owe, providing you with financial relief.

Fresh Start: Once your OIC is accepted and the agreed-upon amount is paid, you will be considered in good standing with the IRS, allowing you to start anew with a clean slate.

Avoiding Further Collection Actions: When you submit an OIC, the IRS puts a hold on collection efforts, including wage garnishments and levies, providing you with a temporary reprieve from aggressive collection actions.

Flexible Payment Options: In some cases, the IRS may allow you to make a lump sum payment or set up a reasonable payment plan to fulfill the agreed-upon settlement amount.

Qualifying for an Offer in Compromise

It's important to understand that an Offer in Compromise is not a guarantee. The IRS evaluates each application carefully and assesses various factors to determine eligibility. Some key criteria considered include:

Ability to Pay: The IRS examines your current financial situation, including income, expenses, and assets, to determine your ability to pay the full tax debt.

Doubt as to Collectibility: You must demonstrate that it is unlikely the IRS will be able to collect the full amount owed from you, even through installment agreements or other collection methods.

Effective Tax Administration: If you can prove that paying the full tax debt would create a significant economic hardship or inequity, the IRS may consider your case under this criterion.

Preparing a Strong Offer in Compromise Application

To increase your chances of a successful Offer in Compromise application, consider the following tips:

Seek Professional Help: Working with a tax advisory service that specializes in Offer in Compromise cases can greatly enhance your chances of success. These professionals have in-depth knowledge of the process and can guide you through the requirements, help you gather the necessary documentation, and present your case in the best possible light.

Accurate Financial Information: Ensure that all your financial information is accurate and up to date. This includes your income, expenses, and asset valuations. Any discrepancies or inaccuracies can jeopardize the outcome of your OIC application.

Complete Application: Fill out the Offer in Compromise application form (Form 656) thoroughly and provide all requested supporting documents. Incomplete or missing information can delay the process or lead to rejection.

Explain Special Circumstances: If you have exceptional circumstances that impact your ability to pay, such as health issues or other financial hardships, make sure to include a detailed explanation and supporting documentation. This can strengthen your case for acceptance.

Demonstrate Compliance: Show the IRS that you are currently in compliance with all tax filings and payment obligations. This includes filing all required tax returns and making any current tax payments promptly.

Patience and Persistence: The OIC process can be lengthy, and it requires patience. Be prepared for potential negotiations and follow-up requests from the IRS. Working closely with your tax advisory service, stay engaged and responsive throughout the process.

Conclusion

When faced with overwhelming tax debt, an Offer in Compromise (OIC) can serve as a lifeline, allowing you to settle your tax liabilities for less than the full amount owed. However, successfully navigating the complex requirements and ensuring a strong application can be a daunting task without professional guidance. That's where Track My IRS Account comes in. As a leading tax advisory service provider based in Kissimmee, our specialized team has extensive experience in assisting clients with Offer in Compromise cases. We are dedicated to providing personalized support, helping you understand your options, and maximizing your chances of a successful OIC submission.

Don't let tax debt continue to burden you and hinder your financial well-being. Take the first step towards financial freedom by reaching out to Track My IRS Account today at (407) 403-6705. Our highly skilled professionals are committed to assisting you every step of the way through the process of settling your tax debt with an Offer in Compromise. Let us alleviate the stress and guide you toward a brighter and more secure financial future.

Empower yourself with the expertise and knowledge of Track My IRS Account. With our comprehensive tax advisory services, including specialized assistance in Offer in Compromise cases, you can gain peace of mind knowing that you have a dedicated team by your side. Together, we will explore the possibilities, present a strong case, and work towards reducing your tax liabilities through an Offer in Compromise. Contact us today and let us help you find the path to a brighter financial future.